North Jersey office boom, 30 years later: Here's what happened to all those buildings

56 at Roseland, is an office building converted to meet the needs of two large law firms.
North Jersey Record

The 56 at Roseland building is a former corporate campus for a single pharmaceutical tenant that has been converted into spaces for two large law firms and other tenants, with shared amenities such as(Photo11: Viorel Florescu/Northjersey.com file photo)

Nearly all of the office buildings in North Jersey were built during a 1980s construction boom, and they are therefore roughly the same age. But they have vastly different life expectancies.

Some have been given up for dead and are scheduled for demolition.

Others are past their prime and sit unloved and empty.

But a growing number have been reborn, with head-to-toe renovations designed to please a new generation of workers.

Millennials, and the employers seeking to attract them, want office environments with an urban feel, even if that means creating a mini-downtown within a bland suburban office park by adding such amenities as walkways, restaurants and housing.

In their evolution from the 1980s, the office buildingsthat “can create that exciting type of environment in the suburbs will be the winners,” said Rutgers Professor James Hughes, dean emeritus of the Edward J. Bloustein School of Planning and Public Policy and an expert on demographics and economic trends.

Along with those winners, “there will be a lot of losers that just come down,” said Hughes, who during his career has tracked the rise and decline of New Jersey’s office parks and their impact on the state’s suburbs.

Office buildings colonized the North Jersey suburbs in the last decades of the 20th century. Now, changing demographics and seismic shifts in the way we work are reshaping those aging corporate parks.

At the moment, fueled by a robust economy, older office buildings are proving more resilient than previously predicted, with a number of formerly vacant corporate campuses getting a new lease on life.

In Essex County,for instance, a striking, zigzag-shaped glass building built in 1982 in Roseland as a corporate palace for Prudential, and later home to a succession of pharmaceutical companies, now houses two law firms and other tenants who wanted corporate campus amenities without the cost of a corporate headquarters building.

At the site of the former Hoffmann-La Roche headquarters, a 116-acre campus that spans the border between Clifton and Nutley, predictions that the site would sit vacant for a decade have proved wrong. In the two years since the site was sold, Hackensack University Medical School at Seton Hall University has moved in, along with the Seton Hall School of Nursing and College of Medical Sciences, three bio-tech research firms and fashion company Ralph Lauren.

“Everybody told us it would probably take 10 years-plus to develop this site,” said Ed Cohen of Prism Capital Partners, the developer of the site, now called ON3. It now looks as if the site could be fully developed in five to seven years.

The new high-tech Unilever headquarters in Englewood Cliffs, NJ. Ian Dunning the Workplace Director for Unilever North America, shows the new Unilever headquarters on Tuesday May 08, 2018. Anne-Marie Caruso/NorthJersey.com

The new high-tech Unilever headquarters in Englewood Cliffs, NJ. Shown on Tuesday May 08, 2018. Coen Van Oostrom of Edge technologies speaks about the new and improved Unilever facilities. Anne-Marie Caruso/NorthJersey.com

The new high-tech Unilever headquarters in Englewood Cliffs, NJ. Katie Ambrose, the Employer Brand Manager for Unilever talks in front of the Tea Bar on Tuesday May 08, 2018. Anne-Marie Caruso/NorthJersey.com

The new high-tech Unilever headquarters in Englewood Cliffs, NJ. Every aspect of the new building is designed for maximum efficiency, including temperature control as shown on Tuesday May 08, 2018. Anne-Marie Caruso/NorthJersey.com

Office morphs to residential

But not all vacant office buildings are having the same success finding tenants.

Municipalities that in the 1980s courted office buildings as the perfect new source for coveted tax revenue — nearly invisible neighbors with no impact on the school system — now accept the fact that some of those buildings will be replaced with apartment complexes and mixed-use projects.

In Woodcliff Lake and Montvale, plans are underway to replace office sites with multi-family housing. In Upper Saddle River, the former Pearson publishing headquarters awaits redevelopment as multi-family residential.

Plans are underway for the former Intel and Dialogic headquarters on Route 10 in Parsippany to be replaced by a residential and retail complex with 441 apartments, 100,000 square feet of retail and a shared outdoor space(Photo11: Joan Verdon/northjersey.com)

In the Morris County township of Parsippany-Troy Hills, a vacant office building on Route 10 that once housed tech firm Intel is to be demolished and replaced by a residential and retail complex with a “woonerf” — a groundbreaking “living street” public space concept imported from the Netherlands.

The developer suggests the project will help the surrounding office parks of Parsippany, which has the most office space in North Jersey,by creating a new residential community where millennials will want to live. Parsippany companies looking to hire millennials, the argument goes, might have better luck if they can point to a new, walkable community nearby.

“We believe our project will act as a catalyst for a lot of the vacant office space in the area,” said Mark Pottschmidt, co-founder of Stanbery Development, which bought the site four years ago.

“A lot of the millennials who these Fortune 500 companies are looking to attract don’t want to live in the suburbs," Pottschmidt said. "They want to live in Jersey City and Hoboken and be able to walk downstairs and have a coffee or a beer” — the sort of ambiance that Stanbery plans to replicate along Route 10.

Relatively low vacancy rates

An artist's rendering of the proposed residential and retail development with a "walkable" outdoor space that would replace the long-vacant office buildings at 1515 Route 10 in Parsippany.(Photo11: Courtesy of Stanbery Development)

Estimates on vacant office space in North Jersey and the rest of the state vary in reports produced by commercial real estate firms.

Jones Lang LaSalle (JLL) calculated the state’s office vacancy rate at 25.5 percent and the North and Central Jersey rate at 23.6 percentin a report released in October.

While that rate seems shockingly high, JLL notes that vacancy rates are at their lowest level in nearly a decade.

Real estate firm Avison Young’s third-quarter report last month had an even more optimistic view. It put the office vacancy rate for New Jersey at 15 percent in the third quarter of 2018, down from 15.1 percent a year earlier. The North Jersey rate was stable, at 15.7 percent.

Within North Jersey, according to the Avison Young report, Western Morris county had the highest vacancy rate, at 43.9 percent, and the vacancy rate for Parsippany was 22.4 percent. Short Hills/Millburn had the lowest rate, at 5.2 percent.

The JLL report put the Parsippany vacancy rate at 31 percent.

An empty office building on Route 10 in Parsippany-Troy Hills.(Photo11: Joan Verdon/northjersey.com)

In the 1980s, New Jersey added over 100 million square feet of suburban office space. The amount of suburban office space in the United States doubled between 1980 and 1985.

The North Jersey office boom was fueled by anexpanding economy and a corporate exodus from congested cities to less expensive headquarters in the suburbs.

The opening of Routes 80 and 287 helped make municipalities like Parsippany a magnet for office buildings, because corporate leaders wanted to work near the suburbs where they lived.

"We are like a crossroads. You can get anywhere from here," said Michael DePierro, a Parsippany-Troy Hills Township Council member for over 30 years. "That's why so many Fortune 500 companies have moved here, and that's why, when the economy was great and businesses were booming, they built a lot of office buildings in this area."

Technology the job eliminator

The Great Recession that began in 2008 and the accompanying job loss are often cited as the death knell for the suburban office market, but the first blows were struck almost a decade earlier, as technology reduced the number of white-collar jobs in those office buildings.

Demographics expert Hughes cites the 500,000-square-foot headquarters that Continental Insurance built in Cranbury in the mid-1980s.

“That was before the internet, so insurance companies had a lot of white-collar labor with desktop hand calculators doing all of their processing and record-keeping. All those jobs have been wiped out by information technology,” he said.

The Continental Insurance building was demolished in 2017 and has been replaced by two warehouse distribution centers, reflecting Central Jersey’s shift into a shipping and logistics hub driven by Amazon’s massive fulfillment centers along the turnpike.

Technology also reduced the space per worker that companies need to lease.

While many 1980s office buildings were cubicle farms — designed to hold rows of paper pushers, along with storage for reams of paper records — the office buildings that will survive can be adapted into creative and collaborative spaces for today's workers.

“Some of the buildings are able to be transformed into millennial-friendly workplaces,” Hughes said.

From one, many

Owners of 1980s-era office parks disagree on which types of buildings have the best survival chances.

Mountain Development Corp., a joint-venture owner of 56 at Roseland, likes to invest in former single-tenant corporate campuses that have the potential to be shared among several new tenants. When it bought the 56 at Roseland building, it was vacant. It had been the U.S. headquarters of the pharmaceuticals firm Organon, a Merck subsidiary.

Mountain Development Corp. remodeled the 400,000-square-foot building to accommodate two large tenants and several smaller ones, with large conference and meeting areas that can be shared by the tenants. The large tenants also have used some of the former wide-open corporate spaces in the building to create new gathering places for their employees, as well aslounges and coffee bars.

The striking design of the original building, and the chance to create a campus-like feel without taking over the entire space, convinced law firm Connell Foley LLP to lease 75,000 square feet for its headquarters, after looking at more than 30 other sites in Morris and Essex counties.

“Out of every other commercial office building in this area, it has the very unique characteristic of the wow factor,” said Phil McGovern, managing partner at Connell Foley.

He knew the firm had made the right choice last spring when he ran into a veteran attorney from another firm who was in the building for a meeting. "Hesaid, 'If your intention by the design and build of this place was to tell the legal community you’re here for another 80 years, you’ve accomplished your goal,' ” McGovern said.

“Out of every other commercial office building in this area, it has the very unique characteristic of the wow factor.”

Phil McGovern, managing partner at Connell Foley

The first large tenant for the renovated building was another major law firm, Lowenstein Sandler LLP, which is leasing 170,000 square feet.

Corporate campuses “may have all kinds of operational challenges because they were designed for a single tenant, but in our view they were built spectacularly,” said Michael Seeve, president of Mountain Development Corp.

“There’s so much more to them than the normal boxy, three- or four-story suburban office building that a normal developer would build,” Seeve said.

Mountain Development Corp. announced in August that the building is nearly full, with the addition of smaller tenants. All tenants share such amenities as an outdoor lounge with fire pits, a volleyball court, a gym and fitness center, a large cafeteria and a hair salon.

Change in strategy

Hackensack-based real estate investment firm Capstone Realty Group had been investing in smaller office buildings that could accommodate multiple small tenants but now likes larger buildings, because tenants want more amenities.

“They want the ability to be part of a larger community,” said Mitchell Adelstein of Capstone.

“Tenants are changing the way space is being used," he said. "They’re putting more people per square foot than ever before.” Employees who work in a common area rather than separate offices want the ability to “get up from their crowded seat and go into a relaxation lounge or go into a game room, or take their computer into a Wi-Fi zone outside and work outdoors.”

The owners of the Continental Plaza office towers in Hackensack are betting on its location near a train station, and newly added amenities, including a fitness center and shared conference rooms, to attract tenants.(Photo11: Mitsu Yasukawa/Northjersey.com)

Capstone is betting that one of the oldest office high-rise buildings in Bergen County, the Continental Plaza complex in Hackensack, can be modernized to appeal to a millennial workforce.

Capstone joined with JD Companies of Hackensack to buy the three-building Continental Plaza for $63 million in 2016. It was considered a distressed asset with a bargain price tag. The complex had sold for over $100 million in 2004, but went into foreclosure during the recession.

For JD Companies, the decision to invest in the complex was personal. The founder of JD Companies, the father of the company’s current chief executive, built the complex between 1969 and 1976. “We knew the buildings and we knew what needed to be done,” Chief Executive James D’Agostino said.

He had watched his father erect the buildings and knew they had good bones, built in an era of sturdier construction. “You couldn’t reproduce these buildings for three times what we paid for it,” he said.

Capstone and JD are investing upwards of $10 million to improve the buildings and add amenities like a better fitness center, large conference rooms with videoconferencing capabilities that can be shared by tenants, and expanded food service.

An expanded cafeteria that is shared by all tenants is one of the amenities at the remodeled Continental Plaza in Hackensack.(Photo11: Kevin R. Wexler/NorthJersey.com)

“We’re trying to create an experience for the tenants here that transcends just an office,” Adelstein said. “So there’s an environment. There’s a campus. There’s Wi-Fi outside. You can sit outside and work, you can sit in our coffee bars, our cafes, you can sit in our co-lab space, you can work out in the gym.”

Adelstein also sees Continental Plaza as having an edge over more remote 1980s office buildings because of its location between Hackensack and River Edge, and adjacent to the River Edge train station.

Mass transit a plus

Access to mass transit and the lower cost of an Uber ride from the nearest train or light rail station are key factors Kenneth Pasternak of the KABR Group looks at when deciding to invest in a building.

KABR, along with partner investors, began buying buildings in Overpeck Corporate Center in Ridgefield Park in 2009, when the economy was crashing and the death of the suburban office market seemed certain. Between 2009 and 2014 they acquired four office towers in the complex, and they have since purchased two vacant lots for expansion.

“We bought the two empty parcels because we see that light rail is going to become a reality” in eastern Bergen County, Pasternak said, with a Palisades Park light rail station planned for “literally across the street” from the Overpeck complex.

Kenneth Pasternak, executive chairman of the KABR Group, one of the owners of office buildings in the Overpeck Corporate Park in Ridgefield Park, N.J.(Photo11: Danielle Parhizkaran/NorthJersey.com)

“We’re bullish on suburban office connected to urban transit, and we think that definition could be enlarged by things like Uber and an extension of light rail,” Pasternak said. “But we don’t think being in Mahwah is good. Because an Uber ride there [from millennial apartments in Hoboken or Jersey City] is $40.”

Like other office owners, KABR and its investment partners have added fitness centers, cafeterias, conference rooms and auditorium space that tenants can share.

The Overpeck buildings were largely empty when KABR bought them, but Pasternak says he may not have enough space to accommodate expansion by current tenants.

“If you buy well-located Jersey suburban, even if it's empty, and you put money in it, and you have competitive rates, you’ll get tenants,” he said.

In addition, Pasternak doesn't believe office demand will be replaced by an entirely home-based workforce. In fact, he thinks the trend is swinging back toward employers wanting workers to come to the office.

“There are reasons why people want to work together and collaborate — group learning and things that only happen when you have somewhat of a work environment,” he said.

Temper the optimism

While the office market, even for 1980s vintage suburban office space, appears more resilient than originally forecast, with a number of large leasing deals being signed this year, Hughes cautions that optimism about the market should be tempered. “The current economic expansion nationally will be the longest in history if we make it to July next year,” he said. “Everything is being boosted by a business cycle that’s really robust.”

“It’s a game of musical chairs that’s taking place in the New Jersey suburbs.”

James Hughes, Rutgers dean emeritus

Another important fact to keep in mind, Hughes said, is that new tenants for refurbished buildings usually are relocating from other New Jersey office buildings, and are probably taking less space than they had in their prior buildings.

For example, Connell Foley LLP was just across the street before it moved to 56 at Roseland. Ralph Lauren is moving out of Lyndhurst and into the ON3 project in Clifton and Nutley.

“So it’s a game of musical chairs that’s taking place in the New Jersey suburbs,” Hughes said.

Campuses like ON3 that can transform themselves from a mere office campus into a mini downtown, with anchor tenants and a set of amenities that make the place exciting, can have a long life span, he said.

“But those isolated buildings perched on a highway — they’re not environments where creative work can take place,” Hughes said.